Gold Prices Pull Back on Profit-Taking

Gold prices pull back for the first time in the last three sessions as investors take profits ahead of the Fed announcement.

NEW YORK ( TheStreet) -- Gold prices were pulling back on Wednesday as investors took profits from a two-day winning streak that resulted from troubles in Cyprus.

Gold for April delivery was shedding $2.60 to $1,608.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,613.90 and as low as $1,605 an ounce, while the spot price was dipping $4.20, according to Kitco's gold index.

Cyprus has needed about 17 billion in bailout funds, but European Central Bank officials have been willing to part with just 10 billion. Part of the discussions to receive those funds included a tax on bank deposits in the country, but the Cypriot parliament voted down the measure late Tuesday.

Gold popped on Monday as investors moved into the yellow metal as a safe-haven play amid fears that the bailout plan for Cyprus would spread to other distressed economies in the eurozone, and the precious metal advanced a second day for its safety appeal.

"The immediate threat of Cyprus is out of the market, so you're seeing a little profit-taking," said George Gero, precious metals strategist at RBC Wealth Management. Gero said Tuesday's rally witnessed open interest decline instead of advance, which he said means there was more short-covering than new buying in gold.

People may be sitting on the sidelines on Wednesday in anticipation of the Federal Reserve's policy-making announcement.

The Federal Open Market Committee will conclude its two-day meeting and issue a statement at around 2 p.m. EDT. FED Chairman Ben Bernanke conduct a press conference shortly after the announcement.

Traders likely are searching for any hint from Bernanke and the Fed as to whether the central bank will scale back its quantitative easing programs any time soon, especially as a slew of U.S. economic indicators in recent weeks have continued to beat economists' expectations.

The Cypriot bank troubles have left silver in a tight trading range, largely because the market's perception is that the metal's safe-haven appeal is offset by the industrial weakness a Cyprus default could generate.

The Bank of England's minutes from its latest meeting revealed interest rates would remain unchanged at 0.5%, and that the central bank would continue £375 billion in asset purchases. Three members of the committee voted to boost the size of the asset purchase program to £400 billion, the Bank of England said.